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The Real Estate Board of New York’s (REBNY) Real Estate Broker Confidence Index for the second quarter of 2018 was 5.53 out of 10, a decrease of 0.25 since brokers were surveyed about the first quarter of 2018.

Rising interest rates, tariffs, and concerns about the implications of tax reform—paired with uncertainty surrounding an unstable political environment—were the primary factors impacting New York City brokers’ confidence.

"As federal policies have taken effect, local real estate markets have been seeing their impact on buyer hesitancy and seller uncertainty," said John H. Banks, REBNY President. "Despite these conditions, New York City real estate brokers remain positive overall about the present situation and future real estate market."

The Commercial Broker Confidence Index, which focuses only on responses from members of REBNY’s Commercial Brokerage Division, was 6.43 in the second quarter of 2018, an increase of 0.41 since brokers were surveyed about the first quarter of 2018. The Commercial Broker Confidence Index grew by 0.49 year-over-year, up from 5.94 in the second quarter of 2017.

Unlike the first quarter of 2018, when commercial brokers were confident about tax reform, they expressed more concern for increasing interest rates and political instability in the second quarter of 2018.

"Combination of end of VC [venture capital] cycle, rising interest rates, and lack of political certainty are all negatively impacting market. Moreover, the WeWork's of the world have created a false supply / demand balance. Had those companies not existed, the market never would have seemed as strong," said one commercial broker.

Despite these conditions, and even though they are uneasy about the market six months from now, commercial brokers remain positive overall about the present situation.

"[I] Think market is stable currently, but overall outlook over the next 12-24 months is slightly negative," said another commercial broker.

The Residential Broker Confidence Index, which focuses only on responses from members of REBNY’s Residential Brokerage Division, was 4.63 in the second quarter of 2018. This was a 0.91 decline since brokers were surveyed about the first quarter of 2018, and a considerable decrease of 1.31 from the second quarter of 2017. The second quarter of 2018’s Residential Broker Confidence Index is currently below five, which indicates that brokers’ confidence related to the market is negative.

Many residential brokers expressed concerns about tax reform, rising interest rates, an oversupply in the market, and political instability.

"Concerned about a slowing economy and turbulent political environment. Inflation and rising interest rates might also slow sales activity," said one residential broker.

Another residential broker explained that buyers are not willing to pay what sellers are asking, indicating that buyers are slow to make decisions while sellers are reluctant to lower their prices.

"This is not a new phenomenon, but it has been coming on for several years and is now compounded by rising interest rates and the new tax law capping deductions at $10K," the residential broker said. "I am not optimistic in the near term and, unless sellers recognize the new reality, I think 2019 will be a continuation of 2018."

Several residential brokers commented on the need for upgrades to the existing housing stock.

"The biggest issue is still pricing, but a close second place is condition of the apartment," said a residential broker. "Buyers are slower to purchase an apartment that needs a good deal of work."

Meanwhile, in the rental market, residential brokers noted that renters are less inclined to pay brokerage fees.

"People are looking for no fees and are not willing to pay a 15% fee," said one residential broker.

Another residential broker said: "Almost 15 years in the business and I have never gotten the amount of push back on fees during the summer as I am now. Landlords that are not paying the broker’s fee will definitely have to start as the slower months come."

All of these concerns led to the record low Residential Broker Confidence Index of 4.63 in the second quarter of 2018 and affected the Residential BrokerFuture Confidence Index (outlook on the future market six months from the date the survey was completed) of 4.46, a 1.18 decrease from the first quarter of 2018.

REBNY regularly surveys its residential and commercial brokerage division members to measure their confidence in the New York City real estate market now and six months from now. Survey results are published quarterly with a maximum index of 10.